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French manufacturing output fell back into contraction in July, overall France saw modest growth driven by the service sector with an expansion in business activity for the fourth month in a row.

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Markit Flash France July PMI

  • Flash France Composite Output Index(1 ) at 51.7 in July from 52.7 in June (2-month low)
  • Flash France Services Activity Index(2 ) at 52.2 in July (52.9 in June), 2-month low 
  • Flash France Manufacturing Output Index(3 ) at 49.6 in July (51.7 in June), 3-month low
  • Flash France Manufacturing PMI(4 ) at 50.0 in July (51.9 in June), 3-month low

 

July showed a slower increase in private sector business activity. Modest growth was driven by the service sector, which posted an expansion in business activity for the fourth month in a row. However, the rate of increase decelerated from June and was moderate overall. Meanwhile, manufacturing output slipped back into contraction territory, following a first rise for four months in June. That said, the decline was only marginal.

 

France PMi JUly

  • New orders placed with private sector companies in France rose at a softer rate in July, driven by a solid increase in demand at service providers.
  • New export business was broadly stagnant at the start of the third quarter, with a contraction in international sales at manufacturers broadly offsetting a modest rise at services firms.
  • The decline at goods producers was only slight overall, it was the quickest for three months.
  • As has been the case in each month since November 2016, French private sector firms increased their staff numbers in July. The rate of job creation eased from June’s eight-month high, but remained solid overall.
  • Workforce expansion was driven by service providers
  • Manufacturers recorded their first reduction in employment during 2019 so far. July data pointed to increased capacity pressures in the French private sector, with backlogs of work increasing for the third month in a row.
  • Input costs faced by French private sector firms continued to rise in July. However, the rate of inflation decelerated for the second month in a row to reach the softest for nearly two years.
  • A key factor behind the slowdown was a first fall in cost burdens faced by manufacturers since May 2016.
  • Output prices set by private sector companies increased only slightly during July.
  • The rate of inflation decelerated from June, with both manufacturers and service providers recording softer rises.
  • Private sector firms maintained their optimism towards the business outlook at the start of the third quarter. The degree of confidence stronger than in June, primarily driven by an increase in optimism in the service sector. 

Comments

Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

“Following a seven-month high in June, growth of the French private sector eased at the start of the third quarter. The ongoing geopolitical tensions.

“Notably, the rate of expansion in overall business activity remains historically subdued and far weaker than the averages registered during 2017 and 2018. Moreover, softer growth in July dents hopes of a swift recovery to the long-run rate, which were beginning to materialise after June’s solid performance.”

Source: IHS Markit

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